Understanding Sovereign Gold Bonds: A Smart Investment Choice
Sovereign gold bonds (SGB) were introduced by the Government of India in 2015 under the Gold Monetization Scheme. The idea of the Gold Bonds was to enable investors to participate in the movement of gold prices without going through the hassles of buying and selling physical gold.
Sovereign gold bonds (SGB) vs Gold ETF vs Digital Gold
| Features | Physical Gold | Digital Gold | Gold ETF | Sovereign Gold Bond (SGB) |
|---|---|---|---|---|
| Purity | Purity not guaranteed | Purity is not an issue | Purity is not an issue | Sovereign Guarantee |
| Liquidity | Highly Liquid | Instant Credit in E-Wallet | Liquidity at T+1 | Liquidity at fair value is not available for t<5 years |
| Risk | Higher risk of theft | Safe and insured No regulator | Safe and insured | Backed by Sovereign guarantee |
| Carry Benefit | No carry benefits | No carry benefits | No carry benefits | Fixed interest income |
| Key Costs | Design/Making, Insurance/Storage & GST (3% of purchase price) | GST (3% of purchase price) & Spread (approx 6%) | Total costs of 0.5% to 1% annually inclusive of expense Ratio, Demat Account Charges & Brokerage | No visible expenses |
| Capital Gains Tax | If T < 3 years, taxed at marginal rate of taxation, STCG if T > 3 years, taxed at 20% post indexation, LTCG | If T < 3 years, taxed at marginal rate of taxation, STCG if T > 3 years, taxed at 20% post indexation, LTCG | If T < 3 years, taxed at marginal rate of taxation, STCG if T > 3 years, taxed at 20% post indexation, LTCG | If T < 3 years, taxed at marginal rate of taxation, STCG if T > 3 years, taxed at 20% post indexation, LTCG (No capital gain tax if SGB are redeemed on maturity or early redemption) |
And above all, remember online investors get a discount of ₹ 50/ gm too on purchase of SGB.
Sovereign Gold Bonds are smart investments to make. The price of SGBs is linked to gold, which means that if the gold value rises, your SGB also becomes more valuable. Sovereign Gold Bonds (SGBs) are way better than physical gold.
Hence, SGB is one of the best ways to achieve portfolio diversification with investment in gold.
How to invest in SGB?
Start investing in Sovereign Gold Bonds (SGB) today with Stocko!
